Lifetime allowance reduced, protection for those with large funds

The Government has confirmed that the lifetime allowance will be reduced to £1.5m from 6 April 2012.

However people with savings above £1.5m, or those with funds under £1.5m who believe the value of their pension pot will breach this level due to future investment growth, will be able to apply for a new personalised lifetime allowance of £1.8m. However they will have to cease building up benefits in all registered pension schemes from 6 April 2012.

People who want to use this option will need to notify HMRC in writing by 5 April 2012 (HMRC will provide a prescribed form).

Andrew Tully, Senior Pensions Policy Manager at Standard Life said: "This is a new form of enhanced protection similar to that which could have been claimed between 6 April 2006 and 5 April 2009. There is no new form of primary protection. Nevertheless this will still help individuals with large pension savings who were worried that they would face a large tax charge on any fund exceeding £1.5m."